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AICPA Exam CPA-Business Topic 1 Question 84 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 84
Topic #: 1
[All CPA-Business Questions]

For the next 2 years, a lease is estimated to have an operating net cash inflow of $7,500 per annum, before adjusting for $5,000 per annum tax basis lease amortization, and a 40% tax rate. The present value of an ordinary annuity of $1 per year at 10% for 2 years is $1.74. What is the lease's after-tax present value using a 10% discount factor?

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Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.


by Cecilia at Apr 10, 2024, 06:17 AM

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Freeman
24 days ago
I bet the person who wrote this question has a wicked sense of humor. Reminds me of that time my accountant told me a joke about depreciation.
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Ora
26 days ago
Is it just me, or does this question make you want to take a nap? I need some coffee to get through this.
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Johnna
29 days ago
Hmm, I think I need to go through this step-by-step. Gotta love those tax basis adjustments!
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Fletcher
4 days ago
User 1: Let's calculate the operating net cash inflow first.
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Tula
2 months ago
Wow, this looks like a tricky one! I better brush up on my net present value calculations.
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Jerry
8 days ago
Alica: It's $4,350. Option B.
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Reita
9 days ago
Nicolette: So, what's the answer?
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Trina
10 days ago
Alica: And finally, use the 10% discount factor to find the after-tax present value.
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Alica
12 days ago
Nicolette: After that, we apply the 40% tax rate.
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Nicolette
14 days ago
User 2: Agreed. Then we can adjust for the tax basis lease amortization.
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Kami
16 days ago
User 1: I think we need to calculate the operating net cash inflow first.
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Caprice
2 months ago
I'm not sure, but I think the answer might be C) $9,570.
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Mignon
2 months ago
I disagree, I believe the correct answer is D) $11,310.
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Franchesca
2 months ago
I think the answer is B) $4,350.
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